A New Web Site Seeks to Broaden the Market for Merchant Portfolios

Seeking to create a more fluid market for merchant portfolios, two entrepreneurs have created a Web site to showcase assets and broker deals. Boston-based Merchantportfolios.com, which went live about a month ago, is attracting what Lane Gordon, one of the partners, refers to as a “double-digit” number of users browsing a collection of listings that varies in number but has been as high as 10 recently. Assets for sale include not only merchant portfolios but ATM portfolios, rights to residual income streams, and entire independent sales organizations. Gordon refuses to make projections for the fledgling site, but says activity has been picking up. “So far we've been happy with the amount of discussion” the site has stimulated between buyers and sellers, he says. One or two properties are now “very much in play” as a result of listings on the site, he adds. The idea behind Merchantportfolios.com is to attract more bids than is typical with traditional word-of-mouth selling, says Gordon. “The way [porfolios] get sold is someone builds it up to the point where they feel it can be sold or recapitalized,” he says. “So they call two or three people and manage a bidding process among those two or three. Then you and I would read about it. They're really not getting the best price for themselves.” Gordon and Adam Hark, his partner, figure the more visitors the site attracts, the more bids a given asset will garner, creating a more fluid market and potentially leading to higher prices for sellers. Acting as a broker for sellers, Merchantportfolios.com vets both properties and buyers to make sure the former are real and the latter are legitimate players with access to funding. Gordon and Hark also consult with sellers on the offers their listings receive. In return, the site collects a fee in the form of a percentage of the sale price. Gordon declines to specify the percentage but says it varies with the size of the asset, since the site must do more work with larger portfolios. Buyers are asked to register with the site to be eligible to bid. Listings are generic, with no reference to details such as processor connections or geographic location that could give away the identity of the seller. In addition to posting the listings, the site sends new ones out to its registered buyers. For the time being, all bidding takes place offline. Gordon says Merchantporfolios.com may look later on at converting the bidding to an online auction system?in the manner of eBay?but he says the site shies away from it for now because of the size and complexity of the offerings. “With eBay, if the seller discovers the No. 1 bidder is fictitious, they can go to No. 2 or No. 3,” he says. “But these [portfolio] products can be, at the low end, $500,000 [in price]. Obviously we don't want random people walking onto the site and submitting bids.” For now, Gordon says, it's a seller's market, despite the ever-widening credit crisis sparked by the collapse of the sub-prime market. “You would think that the present crunch would have slowed these guys down, but so far it hasn't,” Gordon says.